Despite all the chants of UAL about to emerge from bankruptcy, and how everything is now fine and dandy for them, and lastly how they are profitable now and about to kick everyones butt, UAL officially announced today that due to uncertainty of their financial position, questions over their financial results, and lastly due to unresolved issues, they will not be emerging from bankruptcy this year as earlier discussed, and will remain under federal protection for the time being.

UAL Corp. (UALAQ: news, chart, profile), the parent of United Airlines, will remain under federal bankruptcy protection this year because of uncertainties surrounding its financial results and other unresolved issues, a company attorney said Friday in bankruptcy court, according to wire reports. Shares of UAL moved slightly higher at 75 cents.

CHICAGO (Reuters) - United Airlines parent UAL Corp. (OTC BB:UALAQ.OB - News) said on Friday an uncertain industry outlook means it no longer plans to exit early from bankruptcy, and it now aims to emerge in the first half of 2004.

Executives including Chief Executive Glenn Tilton and Chief Financial Officer Jake Brace had recently indicated that the world's second-largest airline might exit from Chapter 11 much earlier than the 18 months originally projected last December, when UAL filed the largest bankruptcy in aviation history.

MIXED SIGNALS

United's Tilton has given conflicting signals on the timing a bankruptcy exit, but in recent weeks expressed a strong desire for emerging early next year to take advantage of spring travel. US Airways timed its March 31 bankruptcy exit the same way this year, emerging in just eight months.

A number of issues in the United bankruptcy need to be resolved, including contributions to pension plans, Sprayregen said. One involves pension contributions that would require a significant portion of the airline's cash flow going forward.

A range of options are being studied, he said.

United has four separate pension plans, which are underfunded by at least $6 billion, according to recent documents filed with the U.S. Securities and Exchange Commission (News - Websites).

The uncertainty regarding United's business relationship with Atlantic Coast Airlines (NasdaqNM:ACAI - News) and municipal bond litigation are other outstanding issues, along with a special provision of the bankruptcy code known as Section 1110, which deals with the rejection of various aircraft leases.

Moody's Investors Service (News - Websites) late Thursday downgraded ratings on some United debt backed by aircraft. The agency said it downgraded certain Equipment Trust Certificates and Enhanced Equipment Trust Certificates due to uncertainties about sufficient cash flow and increased potential for principal loss to debt holders.

"All of these issues and others are highly relevant to United's business plan," Sprayregen said.

Sprayregen said United will soon submit a court motion to extend the period in which the company has exclusive rights to file its reorganization plan.

Just a question, how long can a company remain in C11? Or is that determined y their creditors? I'd imagine that some of the creditors that do not get paid due to C11 would by now want to see some money.

UAL officially announced today that due to uncertainty of their financial position, questions over their financial results, and lastly due to unresolved issues, they will not be emerging from bankruptcy this year as earlier discussed, and will remain under federal protection for the time being

I believe they are planning to emerge on their originally targeted date of 6/30/2004. Not just questions over their own financial condition, but that of the industry as a whole. The most important issue I see with UAL is the underfunded pension issue, leases, and the ACA mess. But, if what their attorney said is true, they are addressing the pension issue and others and considering all their options. Look for the pilots to accept tough pension changes in exchange for at least a 30-40% stake in the "new" United Airlines post Ch. 11. Sure, there's been some rebound this summer, but the articles I've read on this today stop short of saying it's going to be long-lived or not...we're coming up on the toughest time of the year for them, and we should have a clearer idea of where things stand 6 months hence.

The amount of time spent under federal bankruptcy protection depends on the complexity of the case, i.e. small companies may just be a few months, where large companies like Worldcom, United, etc. may take upwards of two years. I've heard it said that a company should never emerge too early, but not stay longer than necessary, either. We'll see.

I don't think there is a concrete time limit on a company running under Ch11. However, you'll eventually get the creditors upset and you risk one moving to convert the bankruptcy from Chapter 11 to Chapter 7.

Wonderful strategic move? Sure it keeps them safe from paying the bills, but stay in Ch11 too long and you get the creditors upset. Then you also have the negative public perception of your company. I will say this is a smart move in that they aren't going to try to rush to exiting Ch11...which may end up causing them to not get all their ducks in a row and lead to another bankruptcy visit.

The "wonderful strategic move" is being honest about what is going on. It would be too easy to to silence the naysayers by rushing through this process, only to end up back in BK.

You will notice the stock market has not reacted negatively to this news. UAL stock is unchanged, AMR and Delta are both up. StevenUhl777 is right in pointing out that they should stay under court protection to get through the slow period.

We have to remember that while they continue to operate, they have to stay good on their leases and other obligations agreed to. Bankruptcy court protection is against liabilities incurred up to the filing. Since December, they have had to stay current on the obligations they agreed to in terms of leases (both airport and aircraft), financing, wages and operations. Being in BK now doesn't excuse them from honoring those obligations. As we know the BK process gives them the freedom to accept or reject leases, and renegotiate wage, benefit and supply contracts. This is all very complex, takes time, and with the IRAQ situation, SARS, and economic downturn, UA has had a difficult time narrowing down what it is going to take to operate out of BK.

With all due respect, the only people who hold UAL stock anymore are the day traders and the idiots. Once the institutional investors are out of a stock, its movements are hardly indicative of market confidence in any news reports.

Sure, you're right about UAL stock. However, the market might have reacted to UAL's announcement thinking that times are not improving for the industry. If that were the case, we would have seen a sell-off in other airline stocks. Instead, we are seeing prices up - the market is optimistic about the industry and does not feel that UAL or any of others are hiding any negatives from this summer's results.

The one negative in all this is that while in BK, United will have a more difficult time getting customers back and getting new customers. They are going to rely heavily on loyalists such as ourselves to spread the good word.

P.S. - I would have loved to have been a day trader in UAL stock this week seeing a 50% increase!

Look for the pilots to accept tough pension changes in exchange for at least a 30-40% stake in the "new" United Airlines post Ch. 11
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If this happens, then they may as well throw in the towel now, as giving the pilots almost half the company is what got them here in the first place. You also have to remember that UAL borrowed loads of money to get through Chapt 11, and plan to borrow more (1.5 billion) on emergence. The people that lend them this money will be getting a huge piece of the action too, so there will not be a lot left for pilots etc when all is said and done